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How much is a human being worth?

Over recent months the government has declared that employees (including bosses) should be neither over-paid nor under-paid. That’s fine – but how do you judge what is too much or too little?

It turns out that at the top, the level of pay for CEOs currently bears no relationship to performance, as measured by return on capital invested. Yet pay at the top is typically set by a dedicated remuneration committee. The problem is that the members of the committee are part of the magic circle of top employees themselves – so of course they behave ethically and treat others just as they would like to be treated. The result is that top pay escalates without apparent limit.

For those companies that obey the law, at the bottom of the employee payscale there is the minimum or ‘living’ wage which will in practice define the pay of the lowest paid. (Actually there is a big space below that characterised by under-employment and zero hours contracts, but that is perhaps another story.) As far as employees go, there is a proposal for companies to publish the ratio of the pay of their highest paid individual to the average wage. Why the average? Because the average is higher than the lowest wage, which will usually be the minimum wage, and so yields a more comfortable ratio.

On the technical side, companies should simply be transparent about the ratio of the highest to the lowest paid. A number of organisations in the charitable sector already declare that. And companies should also publish the ratio of the rate of increase of the CEO to that of the rate of increase of the company’s return on capital – as well as their highest to lowest pay ratios.

But perhaps more importantly in relation to governance, not only should remuneration committees include employee members as has been suggested, but their remit should be extended to consider the pay of all employees. That would go some way to bring the full spectrum of employees face to face with the full spectrum of pay rates. Maybe that will increase the appetite for fairness.

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Pay and bonuses: we need to know more

In Norway, the income and tax paid by every citizen is on the web. Perhaps the UK isn’t quite ready for the Norwegian system, but how can there be a proper debate about pay, tax and bonuses if we don’t know what anyone gets?

We now know that Network Rail bosses are not taking their bonus. And we know that Goldman Sachs bankers are said to get £1/4m on average. Shouldn’t we also know at least the ratio of highest compensation to lowest compensation (and to the average) within any organisation? The Network Rail Sustainability Report does not mention the issue of pay, except to talk about how much its staff are giving to charity as if Network Rail had given it.

We should start with this kind of transparency for all organisations in which the state has a controlling stake. Isn’t this one of the things that being a stakeholder is supposed to be all about?

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Rotten Fruit

According to the Guardian, staff mangement practice at Orange is barbaric. For example: “Workers on call-centre floors said they had to ask permission to go to the toilet or file a written explanation for going one-minute over a lunch break.”

We are not just talking about mild staff (dis-)satisfaction here, we are talking about the staff suicide rate. Yet according to the CEO of Orange, “In the current economic environment, our practice of corporate social responsibility is more than ever at the core of our business strategy”.

It would seem to follow that, for Orange, CSR means bullying staff. And is at the core of their business strategy.